Rules versus reality in agricultural subsidies: entitlements, capture, and inequality

Second, land-market activity and land-finance dependence amplify these conversion gaps, suggesting that land-factor marketization and local fiscal incentives alter the economic incidence of subsidy rules in grassroots implementation. Third, actual agricultural subsidies have a significantly positive effect on per capita household income after subsidies are excluded, but this income-stimulating effect is stronger at middle and upper income quantiles; the average subsidy intensity at the county level also significantly increases the Gini coefficient and Theil index, indicating that subsidies may raise average income while widening within-rural income inequality.

Fourth, mechanism tests show that increases in the county-year per-mu subsidy standard promote land-rent capitalization, while increases in actual agricultural subsidies foster land inflow, agricultural material inputs, agricultural service inputs, and non-farm investment, thus generating a subsidy-land-input-investment transmission process. The contribution of this paper is to move agricultural subsidy research from nominal payment amounts to a full-process analysis of rule-based entitlements, actual receipt, economic benefit, and income distribution.

It reveals the key roles of implementation deviations and land-market conditions in shaping the distributional incidence of subsidies. The findings suggest that improving the performance of agricultural subsidies requires attention not only to aggregate subsidy amounts and standards, but also to subsidy registries, payment verification, the assignment of subsidy rights in land transfers, and the take-up capacity of resource-constrained households, so as to reduce hidden distributional biases in policy implementation.</p>